Lenders pocket £2.3 billion from credit card holders who don’t transfer balance

The average British credit card holder wastes £279 a year by not taking advantage of 0% balance transfer offers.

Lenders are pocketing some £2.3 billion a year in interest payments that consumers could avoid by moving their debt to another card. This is despite the fact that only 3% of credit card users pay their balance in full every month avoiding any interest payments at all.

Research from Moneysupermarket.com suggests that around 65% of credit card holders have never transferred an outstanding balance to an interest-free card. The website’s poll found that a quarter of respondents either couldn’t be bothered to enquire about transferring a balance or didn’t understand how to.

The survey was published in the same week that two lenders introduced record introductory offers. Borrowers who successfully apply for a Barclaycard Platinum card can take advantage of 0% on balance transfers for 17 months, the longest interest free period the lender has ever offered.

M&S Money launched a card offering 0% interest on purchases for 15 months, also the longest period on record for the firm.

Commentators predict that these offers could prompt other major credit card providers to respond with similar deals as competition returns to the market after banks restricted their lending in the wake of the financial crisis.

Kevin Mountford, head of banking at Moneysupermarket.com, said: “As the nation’s wallets continue to be squeezed by higher living costs, it is crucial consumers look to pay off their debt quickly and efficiently to prevent additional interest from accruing.

“Anyone with an outstanding balance on their card should consider switching to a product offering 0pc interest on balance transfers such as Barclaycard’s Platinum credit card or Nationwide’s new credit card, both offering 17 months interest free.”

He went on to say that 0% offers might not be the best solution for those with poor credit scores: “If you are in this situation and have a debt you need to shift, you need to look at all of your outgoings and try and get a target for paying your debt down. The longer to take to pay off your balance, the more it will cost you in interest.

“Anyone looking to switch cards should always check which card is most suitable for their personal circumstances as different lenders will treat each applicant differently.”

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Zero% balance transfer cards could be an option for those with credit card debt

Brits concerned about their debt problems, which have been accrued through borrowing on a credit card, may want to consider using a zero per cent balance transfer card.

Such is the advice from moneysupermarket.com, which found that Brits are collectively wasting £2.3 billion in credit card interest each year.

That is because these consumers let their debt sit on their credit card accruing interest, with 46 per cent of Brits not paying off their debt in full each month.

Therefore, people worried about their credit card debt could transfer their outstanding balance to a zero per cent credit card, as this will save them £279 a year in interest payments.

Kevin Mountford, head of banking at the price comparison site, said: "As the nation's wallets continue to be squeezed by higher living costs, it is crucial consumers look to pay off their debt quickly and efficiently to prevent additional interest from accruing.

"Anyone with an outstanding balance on their card should consider switching to a product offering zero per cent interest on balance transfers."

Couples coping with debt problems have been advised to be open and honest with one another by Kim Stephenson, a financial psychologist.
Tue, 22 Feb 2011
Around 430,000 students will be given a manual about how to manage their money and avoid debt problems in the process.

Finance charity Credit Action intends to give its guide on student finance to young people planning to attend university in the 2011/2012 school year.

The average student is expected to graduate with debts amounting to more than £23,000 so the charity has created a guide to inform youngsters about the financial support available, how to budget and how to save money.

This could help would-be students learn how to stay in control of their money and help them avoid debt problems while at university.

Joanna Parsley, associate director of Credit Action, said: "Getting this information and guidance into students' hands before they begin university is key as it allows them to prepare financially, so their university experience can get off to a smooth start."..

Mon, 21 Feb 2011
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